How Does Margin Requirement Differ between Futures and Perpetual Swaps?
Margin requirements are generally similar, involving initial and maintenance margins. However, perpetual swaps often have more dynamic margin requirements due to the continuous nature and the funding rate mechanism.
Futures contracts typically have fixed margin requirements until the settlement date. Both use margin to manage leverage and mitigate counterparty risk.
Glossar
Perpetual Swaps
Definition ⎊ Perpetual swaps are a type of derivative contract, highly popular in cryptocurrency markets, that allows traders to speculate on the future price of an asset without an expiration date.
Futures Contracts
Mechanism ⎊ Futures contracts, within cryptocurrency and broader financial derivatives, represent standardized agreements obligating parties to transact an asset at a predetermined price on a specified future date; these instruments facilitate price discovery and risk transfer, extending beyond traditional commodities to encompass digital assets and complex financial indices.
Fixed Margin Requirements
Constraint ⎊ Fixed Margin Requirements impose a non-negotiable, predetermined percentage of the contract's notional value that must be posted as collateral, irrespective of the position's inherent risk profile or any offsetting hedges.
Dynamic Margin Requirements
Calculation ⎊ Dynamic margin requirements represent a sophisticated risk calculation methodology where the collateral needed to support a leveraged derivatives position is not static but changes in real-time.